Navigating for Recovery & Reset Regional Director, Commercial - PowerPoint PPT Presentation

Ask the experts Your Business – Navigating for Recovery & Reset

Regional Director, Commercial Banking, NatWest Victoria Kerton

Growth outlook in the red for 2020. Recent surge in new cases might further dampen economic mood. Market bakes in negative interest rates. Growth outlook in the red for 2020. Recent surge in new cases might further 2020 UK GDP Forecast (% Y/Y Change) UK O/N Rate dampen economic mood. Market bakes in negative interest rates. 0% 0.30% 0.20% -5% 0.10% 0.00% -10% -0.10% -0.20% -15% Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 Aug-23 Nov-23 Feb-24 May-24 Aug-24 Nov-24 Feb-25 May-25 Aug-25 Nov-25 Trading status (24 th Aug – 6 th Sep) 18-Sep 11-Sep 28-Aug 14-Aug All Industries Human Health And Social Work Activities Water Supply Sewerage Waste… Expected percentage impact of Covid Real Estate Activities Wholesale And Retail Trade (2020Q4) Investment Manufacturing Health Employment Construction Admin & Support Transportation And Storage Sales Prof & Scientific Accommodation And Food Service… Real Estate Education Finance & Insurance Professional Scientific And Technical… Info & Comms Arts Entertainment And Recreation Administrative And Support Service… Accom & Food Information And Communication Transport & Storage Wholesale & Retail 0% 20% 40% 60% 80% 100% Construction Currently trading Temporarily closed or paused trading Permanently ceased trading Manufacturing 3 Source: Bloomberg, ONS, DMP -60 -40 -20 0

Economic outlook summary • GDP growth in July was strong. Further progress in August. But only c. ½ of output has been recovered • The hard yards of the recovery are approaching with momentum expected to fade in Q4 • Sectoral disparities striking. Finance & Insurance almost fully recovered, mini housing boom. But there is pronounced weakness in consumer-facing sectors. Recovery Gauge Update Recovery Gauge Update Hospitality, Hotels, Aviation • Rest. reservations cooling since Growth Long road Aug, but above pre-EOHO • July GDP up 6.6%m/m. High-freq Momentum • UK flights -65% below avg - lagging ahead data shows further progress in Aug. waning Eur & US. Hotel occupancy and • Momentum expected to wane in Q4. room rate saw marked Aug rise Epidemiology/ Policy Lending • Cases rising sharply, 2 nd wave now • Unsecured recovering – some Behaviour Robust c.1/2 of 1 st wave. consumer appetite coming back normalisation rebound • Surveys indicate significant • Corporate borrowing has eased delayed behavioural change significantly since March • Govt back-up plan to vaccine Housing Market Mobility • Car use RICS points to strong near-term • Car use close to typical approvals and house price growth plateau, Mini boom, • Pub. transport at 30-40% of pre-CV (even with little pass on of % cuts) pub trans for now • • UK lagging France and Germany House sale supply limited v. low • 1/5 mort holidays on to another Labour Market Rates, Inflation • Cuts to Surveys indicate cuts to come • 5Y swaps avg 0.3% to ‘25 Weaker • Google search “redundancy” gather (0.4% in H1), than H1 elevated pace • Little sign of near-term • Negligible recovery in job postings inflationary pressure Consumer Spending Global • Retail • Retail back to pre-CV level Sharp US Q4 slowdown if no new US, EZ • Masks shift away from services recovered. stimulus (income replacement) momentum • Footfall recovery has plateaued • EZ rebound to summer now slowing services waning (c.70% of normal in both shopping • China – recovery progressing. Only not major economy to see growth in ‘20 centres and High Street)

Government backed lending schemes have supported the UK economy through 2020 – but this will need to transition to “commercial terms” in 2021 Approved UK facilities Cumulative number of Cumulative value of approved Cumulative number of approved facilities facilities applications Bounce Back Loan Scheme 1,260,940 £38 billion 1,552,727 Coronavirus Business Interruption Loans Scheme 66,585 £15.5 billion 142,076 Coronavirus Large Business Interruption Loans Scheme 566 £3.8 billion 992 Future Fund 711 £720m 1,073 Source: British Business Bank 20th September 2020 • With the exception of the Future Fund, the government backed loan schemes utilise debt capacity. Their intention is to support liquidity and working capital during extraordinary interruption: schemes are now aligned in the closing dates of 30 th November, 2020 Key themes & features • The utilisation of these schemes is in many cases alongside utilisation of wider programs of support – JRS, TTP arrangements, Business rate relief, reduced VAT for hospitality, VAT deferrals, grant schemes and Innovate grants and loans which will also have cashflow impact as businesses transition to commercial terms through 2021 • We are now seeing businesses plan for their road to recovery, and in almost all cases there needs to be more strategic thinking across: • Position in market, end markets and supply chains • Structural shifts to the marketplace and the economy • Available debt capacity, liquidity, cashflow and access to capital • The importance of sustainable business planning – and data • The relevance of relationships, ecosystems, megatrends and connectivity

NatWest Commercial Banking – supporting the UK economy beyond lending

Jonathan Grant, Partner & Head of Corporate The investment ready business

8 The Investment Landscape  2019 - Last half - deal activity slowed  Brexit and election  Post election momentum  Increase in deals developed by clients  2020 – big push for active deals to close before the March budget  Entrepreneurs relief reduction  LOCKDOWN end March  May 2020 to September re-emergence

9 Key Issues for Investment & Acquisition Stable business Growth: Synergy Revenue & Profits Ownership Sustainable of all key customer rights base Strong/ viable management

10 What has happened post COVID-19?  Growth Continued or business plan re-cast?  Type of deals that have survived  Professional services  Logistics  IT, SAS, Comms  Stable businesses with credible long term plans  Both the sector and investor are important  Overseas interest has continued (well funded companies looking for new markets/ideas)  PE and investor interest remains strong  Synergy increases value  Existing relationships help to hold interest and trust

11 Delivering Successful Deals  Preparation, commitment and adaptability  Being clear about what you really need  Trusted advisory team  Early preparation & due diligence  Post Covid-19 successful deals:  Diligence is key  Stable business/sector  Established management teams with good succession planning

12 Victoria Jonathan Jonathan Kerton Grant Compton Regional Director, Commercial Partner, Corporate, DMH Stallard Partner, Dispute Resolution, DMH Stallard Banking, NatWest 01293 558506 01483 467433 Jonathan.Grant@dmhstallard.com Jonathan.Compton@dmhstallard.com Simon Robert Bellm Ganpatsingh Partner, Employment, DMH Stallard Partner, Partner, Dispute Resolution TMT, DMH Stallard 01293 558511 01293 605000 Simon.Bellm@dmhstallard.com Robert.Ganpatsingh@dmhstallard.com

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